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About Michael J. Miller

Miller, who was editor-in-chief of PC Magazine from 1991 to 2005, authors this blog for PC Magazine to share his thoughts on PC-related products. No investment advice is offered in this blog. All duties are disclaimed. Miller works separately for a private investment firm which may at any time invest in companies whose products are discussed in this blog, and no disclosure of securities transactions will be made.

D8: DreamWorks Sees Distribution Changing, Comcast Says It Won't

At the Wall Street Journal's D8 conference, Comcast COO Steve Burke talked about buying NBC Universal and defended the concepts of bundled cable channels, content windows, and set-top boxes, saying these would continue despite new technology. But DreamWorks Animation CEO Jeffrey Katzenberg disagreed: H believes that the current system of windows and cable contracts was very likely to change over the next couple of years in response to new technology like the iPad.

Burke started the morning by saying he believed "content and distribution are better together," and that is behind Comcast's pending purchase of NBC Universal. He said the company currently has the ability to deliver more than 70,000 hours of video on demand to its customers, but said he said he would like movies "day and date" when they came out on DVD, all of primetime programming, etc. What slows this down he said were the negotiation with content holders, he said, and becoming a content company helps it.

He said he believed that customers want information on a variety of platforms, including various devices and over the Internet. He said Hulu (which Comcast will own a part of through NBC Universal) and Fancast both believe in ad-supported video content, but are looking at other models, including paid subscriptions. In particular, he talked about the "TV Everyone" concept which uses authentication to provide content over the Internet to cable TV subscribers.

After the NBC deal closes (slated before the end of the year), he said he would be focusing on finding ways for content and distribution to work together. He said this was often not immediately obvious, but can be done, and used Disney as an example.

More after the jump.

Burke said the majority of profits at NBC Universal come from the cable channels; and that was something Comcast was familiar with. He said the network TV business has been in challenging times for some time, but said he was encouraged by rebounding advertising and new retransmission consent agreements. He said that if you include their cable operations, the big TV networks are making as much money as ever. He said he believed that the broadcast TV companies had to invest in creating great content to grow. And he said Universal Studios had to continue to make great movies, and a role to play in both providing content for the cable companies and in moving from a reliance on DVDs to electronic distribution. He said he didn't see Comcast selling off any of the NBC Universal businesses, and also said he didn't see major layoffs because the businesses mostly didn't overlap the existing Comcast one. He said he also expected to run the cable business mostly separately from the content businesses.

He talked about the need for "facilities" that can deliver the tonnage of programming people want, and singled out the satellite and phone companies as competitors, not the Internet because it delivered video in a very different way. He said he didn't see people buying content channel by channel, saying the deals the cable networks want nearly all expect full distribution. He said he did worry about alternatives to multi-channel video (cable, satellite and phone company), but said there was no evidence that people are giving up that service; indeed they continue to grow. He said that he expected thee would be alternatives over the Internet and on devices like the iPad, but that it was in the interest of programmers to keep their access fee business alive.

He talked about using the iPad to choose your program and use it as a remote to change channels on the set-top box.

He said 3D is "definitely coming," and said he thought pretty quickly high-end sets would gain 3D capabilities at a reasonable price. But he said he didn't like putting the glasses on and off, and that some things worked well in 3D but some didn't (including much of football),so it was unclear how much time people would spend watching 3D.

He said he believed in the "window" strategy for movies, opening things in theaters first, then in other outlets like video-on-demand, DVD, and cable, but suggested those windows could narrow. And he said devices like the iPad and other tablets is another opportunity for content; and that new media tend to be additive, not replacing the older ones.

On a consumer market for set-top boxes, he said Comcast would actually prefer that but because of the way the business has implemented different technology in different places, it's very difficult in the U.S. And he said the issue in creating an open software platform is that Comcast has 40 million set-top boxes deployed and it's very hard to change those.

(Last night, Steve Jobs said one reason Apple TV was still "a hobby" is the current system of distributing set-top boxes, because anything added to that adds another box, another remote, and another user interface. He said that could only change if you could change the whole system, but because of the lack of standards, there is no "go to market" strategy that really works.)

In response to a question saying that customers "hated" their cable providers, he said he thought service was getting better, but it was an industry that "cobbled together" a complex network, and it was difficult.

DreamWorks' Katzenberg had a very different view. He said he thought the current system of windows and cable contracts was very likely to change over the next couple of years in response to new technology like the iPad. In fact, he pretty much gushed about the device, saying "The laptop was yesterday's news" and he now only uses the iPad and a BlackBerry.

He said the music business and the movie business were very different, because the movie industry has worked very hard for years to make its products available at a variety of different price points (ranging from theater tickets to selling DVDs and Blu-Ray discs to movie rentals). He was very enthusiastic about theaters as an experience that could now include restaurants, but said he expected that the "windows" would change going forward.

As always, Katzenberg was a big promoter of 3D technology, describing it as another tool like color and music, enhancing what a story teller does. He said only about a dozen films have really been made using the new 3D tools, and made the point that "not all 3D is created equal." He said that when done well, people have loved it, and any backlash has been against low-quality 3D. He said it costs DreamWorks about $10 to $15 million more to make a 3D film than a conventional one.

For the home market, he said TVs were typically on a seven to 10 year cycle; and said he didn't expect people would just junk the TVs they just bought for 3D, but instead 3D would just come in with more of the TVs sold. But he said he thought sports and gaming would be what drove 3D in the home, not movies, because there just wasn't enough content.

Katzenberg also talked about ending the Shrek series and about the upcoming MegaMind, a send-up of the superhero concept. And he talked about creating movies on workstations with multicore processors in real-time (more on that next post.)

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